Are indexed annuities safe?

A:

Quick Answer

Although indexed annuities are not the riskiest investment choice available, they are not necessarily safe either, according to Financial Industry Regulatory Authority. An investor potentially receives no index-linked interest, or the life insurance company that issued the indexed annuity is not able to meet its initial agreement.

To safely invest in an indexed annuity, investors must first examine the issuing insurance company's financial well-being, notes Financial Industry Regulatory Authority. Additionally, investors must be cognizant of an indexed annuity's surrender charges. As annuities are not short-term investments, many investors face steep fees and tax penalties if they need to withdraw their money before the end of the annuity term.